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The Purchasers’ Purported Retraction of an Earlier Repudiation of the Purchase Contract Was Not “Bona Fide” Because It Imposed a Condition for the Retraction Which Was Not Contemplated by the Purchase Contract—Sellers Entitled to Keep $365,000 Downpayment Based Upon Purchasers’ Failure to Close

The First Department, over an extensive dissent by Justice Saxe, determined that the defendants, who had entered an agreement to purchase plaintiffs’ condominium, were not justified in repudiating the agreement based upon on-going “firestopping” work in the condominium-building, and, even if the agreement had been effectively repudiated, the purported retraction of the repudiation was not “bona fide.”  Therefore, the plaintiffs-sellers were entitled to keep the purchasers’ $365,000 downpayment based upon purchasers’ failure to close. The issue on appeal came down to whether the plaintiffs-sellers breached a paragraph of the agreement which required them to clear the unit of any code violations of which the plaintiffs had been notified in writing by the condominium board of managers. The majority determined no such notice had been given to the plaintiffs-sellers. The majority further determined the defendants’ purported retraction of the repudiation was not “bona fide” because it was conditioned on proof of the completion of the firestopping work, thereby imposing a condition not contemplated by the contract:

… [D]efendants point to no provision in the contract that justifies their initial purported reason for canceling the contract, which was that it threatened the safety of themselves and their children. Nor do they claim that plaintiffs somehow prevented them from learning of the firestopping issue. To the contrary, the contract itself referred expressly to a … notice from the board of managers that discussed the status of the then ongoing firestopping project. This was sufficient to place defendants on notice of a potential issue that might have given them pause to execute an agreement in which they acknowledged they were accepting the unit as is.

Because defendants had no right to insist that the firestopping issue be resolved as a condition to closing, their “retraction” of the purported repudiation was ineffective. In order to be effective, a retraction of a contract repudiation must be bona fide … . Defendants’ acceptance of plaintiffs’ offer to schedule a closing was not bona fide, because it was conditioned on plaintiffs’ provision of documents and information establishing to defendants’ satisfaction that the firestopping had been completed. We disagree with the dissent that the letter from defendants’ counsel conditionally retracting the repudiation creates an issue of fact as to whether it was bona fide. That letter unquestionably adhered to defendants’ position, which had supported the initial repudiation, that plaintiffs had a contractual obligation to ensure proper firestopping in the apartment before delivering the deed. The clear implication of the letter was that, if plaintiffs could not establish to defendants’ complete satisfaction that the firestopping work had been performed, defendants would once again refuse to close. As stated above, this position was untenable, and clearly, contrary to the dissent’s view, sought to insert an additional material term or condition into the contract. Again, nothing in the contract required plaintiffs to perform any firestopping, and plaintiffs were entitled to view defendants’ continued insistence on proof that they had done so as an justified refusal to perform under the agreement. Beinstein v Navani, 2015 NY Slip Op 06403, 1st Dept 8-4-15

 

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